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Direct Evidence on Income Comparisons and their Welfare Effects

Listed author(s):
  • Claudia Senik
Registered author(s):

    This paper provides direct evidence that income comparisons exert a significant impact on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Internal comparisons to one's own past living standard outweigh any other comparison benchmarks. Local comparisons (to one's parents, former colleagues or high-school mates) are more powerful than self-ranking in the social ladder. The impact of comparisons is asymmetric: under-performing one's benchmark always has a greater welfare effect than out-performing it (in absolute value). Comparisons which reduce satisfaction also increase the demand for income redistribution, but there, the relative impact of subjective ranking is preponderant.

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    File URL: https://hal.archives-ouvertes.fr/hal-00696621/document
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    Paper provided by HAL in its series Post-Print with number hal-00696621.

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    Date of creation: 13 May 2009
    Publication status: Published in Journal of Economic Behavior & Organization, 2009, 72 (1), pp.408. <10.1016/j.jebo.2009.04.019>
    Handle: RePEc:hal:journl:hal-00696621
    DOI: 10.1016/j.jebo.2009.04.019
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00696621
    Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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